Takashi Negishi, Economic Theories in a non-Walrasiam Tradition, Cambridge University Press, 1985; pp. 205, price not indicated.
This is a collection of fourteen essays on different aspects and areas of economic theory—the unifying theme is that they all relate to problems in some non-Walrasian paradigm. Non-Walrasian paradigms, we may recall, are many: Smith, Mill, Richardo, Marx, Jevons, Bohm-Bawark, Marshall. . . ., and the essays discuss selected issues and problems in the theoretical work of these authors. Since the non-Walrasian tradition includes all these diverse authors, very different in their assessment of the capitalist system—to wit Marx and Bohm-Bawark—the commonality running through these essays is not of any immediate political interest. But the book is certainly of interest to economists and scholars of the history of economic thought.
The author has arranged the essays in four groups. The first on increasing returns and diminishing costs, goes back to the well-known problem of diminishing costs in a competitive economy, which in Marshall causes a problem of indeterminate output for firms eventually leading to monopoly. But in Adam Smith, too, there is a notion of increasing returns arising out of division of labour at the firm level, and this in Smith is the driving force for not only firm's own growth but indeed for the development of the entire system. Negishi asks an interesting question: how does Smith reconcile this basic firm-level drive for increased division of labour with a competitive economy in which the firms are operating? Negishi has an interesting answer— namely that firms face kinked demand curves at the 'natural prices' of Smith—not due to fellow firms' reaction a la Sweezy, but due to consumers' own reaction, so that diminishing costs due to increased division of labour does not upset a 'competitive equilibrium.' That 'the division of labour is limited by the extent of the market'—the famous Smithian doctrine—holds thus with a novel significance in Negishi's interpretation. In the same group of essays the author considers Marshall's life-cycle theory to explain diminishing cost and considers Marx's falling rate of profit under diminishing costs too.
Social Scientist, Vol. 18, Nos. 11-12, November-December 1990